Aviation services group John Menzies said on Tuesday that it continues to trade “slightly ahead” of current market expectations, with weakness in European ground services offset by better trading elsewhere.
In an update ahead of its interim results in September, the company said ground services in Europe were “particularly weak”. However, trading elsewhere has been “encouraging”, driven by new business gains, a generally strong performance within air cargo services, extremely tight cost management and additional support from government schemes.
At 30 June, net debt stood at £183m on a pre-IFRS 16 basis, and total liquidity was £179m, leaving the company with “significant” headroom to deliver on its strategic priorities.
“Commercially, the first six months of the year has been very strong and significantly ahead of last year,” it said. “In May we commenced a new air cargo services contract for Avianca Airlines in Miami, USA, which is the largest single air cargo services contract the group has ever secured. Operations have started very well and we are delivering enhanced service levels to our customer.”
Berenberg, which rates the shares at ‘buy’, said: “Clearly, this update supports our investment case – that Menzies is well positioned for the recovery of the global aviation market, has ample liquidity to trade through the crisis, and will even exit the crisis in a stronger position, aided by cost-saving actions and a portfolio shifting towards higher-margin emerging market and cargo earning streams.
“With a valuation of just 8.8x 2022 price-to-earnings, we consider this a highly attractive recovery play that continued to lag its airline peers.”
At 1255 BST, the shares were up 1.6% at 324.69p.
